Pension funds sue Morgan Stanley, Goldman over misleading $5B Lineage IPO

Five Wall Street giants accused of misleading investors in 2024's biggest IPO as stock plunges to half its offering price.

Two major public pension funds are suing Morgan Stanley, Goldman Sachs, BofA Securities, J.P. Morgan, and Wells Fargo, claiming the banks helped orchestrate securities fraud in last year's largest initial public offering.

The Mississippi and Indiana public retirement systems filed the federal class action in Michigan district court, alleging Lineage, Inc., its executives, and the five investment banks painted a rosy picture of the cold-storage company's prospects while concealing serious business deterioration.

The July 2024 offering raised more than $5 billion in gross proceeds, selling over 65 million shares at $78 apiece. Since then, the stock has fallen to lows near $40—approximately half the IPO price.

According to the suit, the offering documents told investors that Lineage was well-positioned for growth after a brief inventory adjustment period. The materials portrayed the cold-storage industry as resilient, with high occupancy rates and steady pricing power driven by growing demand for temperature-controlled warehousing.

But the pension funds claim a different reality lurked beneath the surface. Customer demand was weakening as new cold-storage capacity came online. Businesses that had stockpiled inventory during the pandemic were not just normalizing—they were fundamentally changing how they managed frozen goods, keeping less on hand permanently. Meanwhile, Lineage had imposed unsustainable price increases that were eroding its competitive position, the suit alleges.

The filing paints Bay Grove Capital Group, Lineage's private equity owner, as the chief beneficiary of the alleged scheme. The firm, founded by Lineage co-executive chairmen Adam Forste and Kevin Marchetti, had spent years rolling up cold-storage warehouses. Between 2020 and early 2024, the company roughly tripled its storage capacity through dozens of acquisitions.

Then came the exit. In connection with the IPO, Bay Grove pocketed a $200 million profit-sharing payment, collected $75 million for selling back operating units, and locked in an $8 million annual services contract—payment guaranteed even if Bay Grove failed to provide any services.

The five banks collected over $191 million in fees, which included the full exercise of their over-allotment option.

By February, cracks were showing. On an earnings call, CFO Robert Crisci acknowledged the business had been "highly unusual" leading up to the IPO, with customers carrying "elevated inventory levels" well into 2024. CEO Walter Gregory Lehmkuhl laid out a timeline: inventory destocking that started in the third quarter of 2023 continued through the second quarter of 2024, with inventory levels remaining elevated for the first half of 2024.

Four months later, at an investor conference, Lehmkuhl made a striking admission. The company had seen "pretty much flat demand" in recent years and was operating in a "flattish environment."

Analysts on quarterly calls had grown increasingly frustrated. During the April 2025 earnings call, one pressed Lehmkuhl on why the "normalization" kept getting pushed back. "For the past few quarters, we've been talking about this normalization of inventory levels," the analyst said, "but it does seem that each quarter it seems to be the next quarter."

The pension funds are seeking to represent all investors who bought Lineage stock pursuant to or traceable to the offering documents. Their claims fall under the Securities Act of 1933, which imposes strict liability for material misstatements in offering documents—no proof of intent to deceive required.

The suit alleges violations of SEC disclosure rules that require companies to reveal known trends likely to harm revenues and to adequately describe material risks. The filing argues that Lineage's risk factors were misleading because they framed as potential future problems what were already occurring at the time of the IPO.

The case remains in its early stages. The defendants have not yet responded to the allegations.